NB Power predicts much higher rate hikes after carbon tax

NB Power says its latest analysis shows the federal government's new carbon tax plan could cost it up to $1.3 billion over the next 10 years and require substantially higher rate increases to pay for than previously announced.

"The implications of a price on carbon ... could potentially result in significant increases in costs to NB Power," the utility revealed in a new 10- year plan put together last month.

The document was sent to the Energy and Utilities Board prior to Christmas but was not entered into evidence in the utility's pending rate application until Friday. An annual rate hearing for NB Power is scheduled for late February, but evidence for that has to be filed in advance.

37.8 per cent increase by 2027

According to the new document, NB Power estimates it may now require a cumulative 37.8 per cent in rate hikes by 2027, most of that to deal with the upcoming price of carbon.

Previously, it had been projecting the need for a series of smaller increases totalling 14.9 per cent by 2027.

NB Power is New Brunswick's single largest emitter of greenhouse gases, largely because of its coal-fired power plant in Belledune and oil-fired power plant in Saint John.

Last October, the federal government announced it will be requiring provinces to impose some kind of tax or other price on carbon pollution beginning in 2018. The tax starts at $10 per tonne and rises to $50 per tonne by 2022.

Utility sees expensive problems

NB Power says the requirement poses five potentially expensive problems it will have to deal with:

• The tax itself.
• A decrease in its ability to competitively export power.
• The need to build or buy more renewable power.
• The need to overhaul its transmission systems to accommodate more imports.
• The need to retire fossil fuel plants that are not yet paid for, earlier than planned.

The report puts the cost of all of those events at somewhere between $660 million and $1.3 billion between 2018 and 2027.

And although it says the province could choose to rebate higher electricity prices caused by carbon taxes back to electricity users, as is being done in Alberta, there is no way to know if that will happen.

"Although revenues from carbon pricing are to remain within the provinces of origin, it is not clear as to how or if those revenues would come back to benefit ratepayers to offset some of the potential cost implications," says the report.

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NB Power says it is still evaluating what it might be able to do to lessen the need for rate hikes, but its current thinking is it will have to add between 1.4 per cent and 2.4 per cent in rate increases per year on top of previously planned increases to cope with carbon prices.

"It is possible that some portion of these costs may be able to be reduced through mitigating activities, but it is not known as to what costs or capital expenditures would be required to reduce the charges," the report says.

"In any event, carbon pricing has the potential to significantly impact and alter this 10-year plan, the magnitude of which will become clearer as further clarity and details emerge from the federal and provincial governments."